Interactive Investor

Discount Delver: the 10 cheapest trusts on 16 February 2024

We reveal the biggest investment trust discount changes over the past week.

16th February 2024 10:19

Sam Benstead from interactive investor

Investment trusts, due to their closed-ended structure, offer investors the chance of picking up a potential bargain. Such an opportunity arises when a trust’s share price is lower than the underlying investments held by the trust (the net asset value, or NAV).  

However, a trust trading on a discount to NAV is not necessarily a buying opportunity. There’s likely a good reason why the trust is cheap, such as subdued short- or long-term performance, or poor investor sentiment towards how it invests.  

In our weekly series, interactive investor highlights the 10 biggest investment trust discount moves over the past week. We publish this article every Friday, using data up to the close of trading the previous day.  

In total, nearly 400 investment trusts have been screened, with the data sourced from Morningstar. Venture Capital Trusts (VCTs) have been excluded. We also strip out trusts with less than £20 million in assets and those that are not available on the interactive investor platform.

Investment trusts in the renewable energy space saw their discounts widen over the past week, with those building out green energy infrastructure particularly affected.

Octopus Renewables Infrastructure's discount to net asset value (NAV) rose from 24.6% to 31.1%. This compares with a 12-month average discount rate of 13%, according to Morningstar data.

The discount on Gore Street Energy Storage Fund also rose, from 36.5% to 42.7%, as did the discount on Harmony Energy Income Trust (65.9% to 70.9%). Greencoat UK Wind’s discount rose from 18.3% to 22.3%.

For more than a year, alternative asset investment trusts, particularly those that aim to pay an income, have been out of favour owing to interest rates rising. 

Those rate rises have caused bond yields to rise, which means investors now receive a higher income on low-risk assets, such as UK government bonds, known as gilts. In turn, this has reduced the appeal of assets that are higher up the risk spectrum.

Changes to interest rate expectations therefore lead to price changes on renewable energy income trusts. The sector is also particularly volatile as it is dependent on borrowing to buy new assets. 

HydrogenOne Capital Growth saw its discount widen from 50% to 54% and Premier Miton Global Renewables Trust’s discount rose to 7.6%, from 3.5% a week ago. 

However, the biggest discount change over the past week was at RTW Biotech Opportunities, which moved from a 25.9% discount to 34.3% discount. 

Rounding off the list are Aberforth Split Level Income, Brown Advisory US Smaller Companies and Life Science REIT. All saw their discounts widen by around 5 percentage points. 

Investment trustAIC sectorCurrent discount (%)Discount change over the past week* (%)
RTW Biotech OpportunitiesBiotechnology & Healthcare-34.28-8.36
Octopus Renewables Infrastructure Renewable Energy Infrastructure-31.11-6.54
Gore Street Energy Storage FundRenewable Energy Infrastructure-42.66-6.17
Life Science REIT Property - UK Commercial-47.02-5.74
Harmony Energy Income TrustRenewable Energy Infrastructure-70.91-4.99
Brown Advisory US Smaller Companies North American Smaller Companies-12.71-4.51
Aberforth Split Level IncomeUK Smaller Companies-5.08-4.38
HydrogenOne Capital Growth Renewable Energy Infrastructure-54.15-4.14
Premier Miton Glb Renewables Trust Infrastructure Securities-7.6-4.07
Greencoat UK WindRenewable Energy Infrastructure-22.32

-4.03%

Source: Morningstar. *Data from close of trading 8 February 2024 to close of trading 15 February 2024.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.